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Sunday, 19 October 2014

What are the international investment law
implications of the Unified Patent Court (UPC)?

No, (thankfully) this is not an exam question for
undergraduates taking the IP course (although you never know…), but rather the
issue that Katfriend Henning
Grosse Ruse-Khan (University of Cambridge, King’s College and Max Planck
Institute for Innovation and Competition) investigates in his guest post below.

Here’s what Henning writes:

“The development (for
better or worse) of European Patent Law, in particular the creation of a
unitary patent title and a common court to litigate patent infringement in
Europe raises, among other things, questions of international (IP) law. One addressed in this brief post concerns the
potential for Investor-State dispute settlement over decisions handed down by
the UPC. It essentially deals with the application of international investment
law standards to UPC judgments affecting European patents.

International investment
law – although a distinct body of rules than IP treaties – is becoming
increasingly relevant for the protection of IP rights, including patents,
abroad [this Kat notes that this is also true for copyright, with particular regard to the role of ISPs. For instance, in its recent Discussion Paper on Online Copyright Infringement, the Australian Government wrote that "Australia is obliged under its free trade agreements with the United States, Singapore and Korea (not yet ratified) to provide a legal incentive to ISPs to cooperate with rights holders to prevent infringement on their systems and networks."]. In a nutshell, these rules, usually embedded in bilateral investment
treaties (BITs) or Investment Chapters in free trade
agreements (FTAs) such as NAFTA
Ch.11, protect assets, including IP rights, of foreign
investors against state interference. Investment rules in BITs or FTAs often
allow foreign investors to challenge host state measures directly in
international dispute settlement in front of an arbitration tribunal. Increasingly,
the measures under scrutiny involve IP rights: Philip Morris currently
challenges tobacco packaging rules in Australia
and Uruguay
as a form of indirect expropriation; while the US pharmaceutical company Ely
Lilly is suing Canada
under NAFTA’s investment protection rules for the revocation of two crucial
patents (for its drugs Zyprexa and Strattera) by Canadian courts.

A confident Gustav pictured moments afterbeing asked to explain the internationalinvestment law implications of the UPC

In Eli Lilly v Canada, Lilly
challenges what it calls a ‘promise doctrine’ (further discussed here)
whereby Canadian courts take for granted what the patent application describes
as useful effect of the invention and hold the applicant responsible for
fulfilling this ‘promise’ of utility: If the patented invention later is found
not to meet a promise the court has constructed from the patent application,
the patent can be revoked. Lilly complains that the strict patentability
requirements resulting from this doctrine, as applied by the Canadian Courts
since 2005, are violating Canada’s international IP obligations under NAFTA,
TRIPS and the Patent Cooperation Treaty (PCT). This in turn, Lilly argues,
breaches the fair and equitable treatment (FET) and expropriation standard
under NAFTA’s investment chapter by interfering with reasonable
investment-backed expectations (see a brief description here
and further discussion here).

In light of these
arguments invoking investment standards against decisions by patent courts,
there are several scenarios for investor-state arbitration challenges of UPC
judgments: Decisions revoking a patent under Artt.32:1 d), 65 UPCA for example
could be challenged as a form of indirect expropriation or breach of the fair
and equitable treatment (FET) standard that is often held to protect legitimate
expectations of the patent holder. Here, an important question concerns whether
a foreign patent holder can claim any legitimate
expectations based on the grant of a patent that a revocation might interfere
with (for a detailed discussion, see again here). In addition, declaratory
judgments of non-infringement based on Art.32:1 b) UPCA could be viewed as in
breach of the duty to provide ‘full protection and security’ – if this standard
is understood as encompassing a duty to protect patents against third party infringements.
Although there are good arguments against such an expansive reading of the
investment protection standards, the Eli Lilly dispute against Canada shows
that such challenges are not just a theoretical option.

Yes: treaty shopping is this cute

The nature of UPC
decisions makes such challenges all the more likely: As “court common to the Contracting Member
States” and “part of their judicial system”, the UPC is – by virtue of the UPCA
preamble – a “national court” of all the
Contracting Member States. As a national court of all these countries, its
decisions could be challenged by investors who enjoy protection under any of the BITs or FTAs agreed by
participating EU Member States, as well as under future EU investment
agreements. Essentially, patent holders may ‘treaty shop’ for the most
favourable international investment agreement available: It may well be quite a
number of such treaties that are binding upon UPCA Contracting Member States
and that offer investor-state dispute settlement.

This highlights the
potential for international investment law and in particular its system of
dispute settlement to interfere with national court decisions and other state
measures affecting patents and other IP rights. It remains to be seen whether
IP holders as foreign investors attempt to use this as a forum where they get
another option for challenging otherwise final decisions of national courts. If
one of the underlying reasons for creating the UPC is to keep the European Court
of Justice out of substantive patent law, then this gives even more reason to worry:
It certainly can be doubted that investment tribunals have any (more) expertise
and experience in ruling on patent law matters. States are beginning to respond
to this problem: The EU and Canada have introduced language in their FTA
aiming to prevent a re-interpretation of IP law via investment tribunals. However,
this is not sufficient to prevent future investor-state arbitration challenges –
as it will not affect the huge amount of BITs already in force between UPCA Members
and third states.”

1 comment:

Anonymous
said...

So after your patent has been revoked or a request for injunction has been denied by the highest judicial instance in a country, in accorance with legislation and jurisprudence/case law in that country...

You have another option for appeal by just calling that country to arbitration over a treaty. Rather than invoking that treaty in the legal proceedings for revocation and infringement?

Very interesting...

And I am always surprised to see it's usually patent holders taking such routes. Would that be because- national courts up to the highest instances do not care about such treaties;- you really need big money to follow such procedures to the end;- the big companies fail to refer to such treaties in national patent litigation; or- the big companies just cannot take no for an answer?

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